Question

Some recent financial statements for Smolira Golf Corp. follow. SMOLIRA GOLF CORP. 2017 and 2018 Balance...

Some recent financial statements for Smolira Golf Corp. follow.
SMOLIRA GOLF CORP.
2017 and 2018 Balance Sheets
Assets Liabilities and Owners’ Equity
2017 2018 2017 2018
  Current assets   Current liabilities
      Cash $ 35,285 $ 38,664       Accounts payable $ 38,232 $ 43,032
      Accounts receivable 18,251 28,576       Notes payable 19,908 16,875
      Inventory 3,880 42,992       Other 20,674 25,354
        Total $ 57,416 $ 110,232         Total $ 78,814 $ 85,261
  Long-term debt $ 119,500 $ 183,060
  Owners’ equity
      Common stock and paid-in surplus $ 55,900 $ 55,900
      Accumulated retained earnings 268,442 306,994
  Fixed assets
  Net plant and equipment $ 465,240 $ 520,983   Total $ 324,342 $ 362,894
  Total assets $ 522,656 $ 631,215   Total liabilities and owners’ equity $ 522,656 $ 631,215
SMOLIRA GOLF CORP.
2018 Income Statement
  Sales $ 510,954
  Cost of goods sold 362,478
  Depreciation 45,588
  Earnings before interest and taxes $ 102,888
  Interest paid 20,583
  Taxable income $ 82,305
  Taxes (24%) 19,753
  Net income $ 62,552
      Dividends $ 24,000
      Retained earnings 38,552

Smolira Golf Corp. has 49,000 shares of common stock outstanding, and the market price for a share of stock at the end of 2018 was $30.

  

a.

What is the price-earnings ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

b. What are the dividends per share? (Round your answer to 2 decimal places, e.g., 32.16.)
c. What is the market-to-book ratio at the end of 2018? (Round your answer to 2 decimal places, e.g., 32.16.)
d. If the company’s growth rate is 6 percent, what is the PEG ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Homework Answers

Answer #1

(a)-Price earnings ratio

EPS = Net Income / Number of common shares

= $62,552 / 49,000 Shares

= $1.27657 per share

Price earnings ratio = Market price per share / EPS

= $30.00 / $1.27657 per share

= 23.50 Times

(b)-Dividends per share

Dividends per share = Dividends paid / Number of shares

= $24,000 / 49,000 Shares

= $0.49

(c)-Market-to-book ratio

Market-to-book ratio = Total Market value of equity / Book Value of Equity

= [49,000 Shares x $30.00] / $362,894

= $1,470,000 / $362,894

= 4.05 Times

(d)-PEG ratio

PEG ratio = Price earnings ratio / Growth ratio

= 23.50 / 6.00

= 3.92

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